A Letter from China

Forget the billion refrigerators. Think a billion Boston drivers, most of whom seem to have first gotten both their cars and their licenses in the past year, all motoring around the Fourth Ring Road intent on achieving their destination as quickly as possible with little or no regard for human life, including their own. Throw in an equal number of bicyclists grudgingly sharing their previously personal space, but determined to demonstrate their displeasure. Add a few hundred thousand pedestrians, each with a swoosh on his chest and a cell phone glued to his ear, and welcome to fin-de-siecle Beijing.This is not your father's People's Republic.Especially since the only sign of Mao for miles is his enormous portrait benignly beaming down on the tourists in Tiananmen Square. The real portrait of China today is that of Market-Leninism, as one point two billion of Paramount Leader Deng Xiaoping's godchildren -- one out of every five consumers on the entire planet -- all actively pursue their own vision of Deng's now-famous dictum that "To Get Rich Is Glorious." And while only a handful of Chinese have succeeded thus far -- China's per capita income is still only $700 per year, a far cry from America's $30,000 -- it's not for lack of trying.China now boasts the world's fastest growing economy, one increasing at the astonishing annual rate of nearly ten per cent, ever since a series of economic reforms begun in 1978 turned the World's Last Great Communist State into something more akin to Powerball. In the midst of two great transitions -- from a largely rural, agricultural society to an urban, industrialized one, and from a highly centralized, planned command economy into a decentralized market-based one -- China has telescoped into a single generation what most countries take centuries to achieve, quadrupling personal income and lifting some two hundred million people out of poverty, most of whom appear to have left their farming villages, moved to large cities, and purchased automobiles.This economic transformation has brought to me to Beijing one week before Paramount Leader Bill Clinton was to arrive and bestow his imprimatur on the stunning changes so apparent at every skyscraper, five-star hotel and KFC franchise that has sprung up since the 1989 massacre at Tiananmen Square(which Clinton & Co. would so dearly like to forget.) America's China policy is called 'engagement', although back when there still used to be Marxists, it would have termed it 'living with the contradictions." And who am I to judge? Here to film a documentary on the Chinese economic miracle on behalf of the World Bank, my crew and I are guests of the Ministry of Finance. But then, as Chairman Deng so aptly put it, it doesn't matter if a cat is black or white, as long as it can catch mice. That probably explains why the biggest and best rose garden in Beijing is cultivated by the managers of a giant steel mill belching vast quantities of thick black particulate into the already smog-ridden air. (Five of the world's ten most polluted cities are in China, and close to 200,000 deaths each year are attributed to air pollution alone!) Capitol Steel is one of many state-owned enterprises that once dominated the Chinese economy, but now contribute only about a third of the Gross Domestic Product. The SOE's are now dinosaurs -- still massive but obviously doomed, at the top of the agenda for future reforms .Most such enterprises are choking with inefficiency, strung out on bad debt extended by state-owned banks, and overstaffed with workers once guaranteed employment. (The closest local equivalent would be, say, the MBTA or the State Legislature.) Finance Minister Xiang Huaicheng complains in our interview that "One person's lunch is shared by 3 persons," meaning that there are too many people working at each job. But places like Capitol Steel are also riddled with contradictions stemming from the size and scale of China's ongoing transformation. Its holdings, for example, include not only the steel mill, but other interests as varied as real estate, hotels, tourism, and construction.SOE's also suffer from the residual effects of China's "cradle-to-grave" welfare system, which once offered job security and social services to everyone, a burden that private companies do not share. At Capitol Steel, for example, workers live in company housing, send their children to the company day care center, and obtain health services at the company hospital. Its elementary school, however, is now run by the government...which also runs the steel mill. Got that? Steelworkers like Shunkang Yau, who has worked here for twenty-seven years, are generally positive about the reforms, even though the government has announced plans to layoff at least thirty million of the one hundred million people still employed at state-owned enterprises. And why not look at the bright side? As Yau explains, before reform, everyone in China was a lot poorer. "At the time I got married, just having a watch meant a lot," he tells me. "Now we can afford such basics as televisions, VCRs, and refrigerators in our homes." That's right -- a billion refrigerators... Workers at other state-owned enterprises, like the Men Tou Gou coal mine north of Beijing, echo the steelworkers. Until a year ago, miner Chung Tang Kuo was a farmer in the far-off Sichuan province. "Before reform, we were only able to maintain a basic level of living," Chung explains. "Now there are more opportunities. Now we have better food, and we can have rice. We even can use oil, which we seldom used in the past. We even have chicken." I heard similar stories all over China. After a week in Beijing filled with bureaucratic briefings, banquets and endless toasts to reception committees comprised of county, municipal and party leaders (all apparently eager to obtain World Bank loans,) and with the imminent arrival of President Clinton, we decamped for the booming coastal port of Shanghai.A thriving metropolis of fifteen million, Shanghai in many respects was like another country entirely. The Shanghainese have their own language, their own cuisine, and their own culture. "Those northern people are really uptight," my local minder said after I complained about Beijing's bureaucracy. Shanghai is the only city I've ever visited that makes New York pale by comparison. In the last five years, city officials built the equivalent of midtown Manhattan in what used to be farmland next to the Huang Pu river. One of every five construction cranes in the world is busy here, throwing up pink and turquoise post-modern eighty story skyscrapers, despite the fact that close to a third of all the office space in the city is currently unoccupied.My first interview is with Zhang Xin Sheng, Chairman and Chief Executive Officer of the Huai Lian group, one of China's largest commercial enterprises. Zhang used to manage the company for the state, but now he's free to make his own decisions about what to sell in Huai Lian's hundreds of supermarkets, convenience and department stores."Twenty years ago, the government controlled all enterprises directly," Zhang explains. "Buying and selling of all merchandise was allocated according to government plan. All enterprises were actually part of the government." Since the reforms, Zhang's role has changed dramatically. "We're like taxpayers to the government now," he continues. "We have our own autonomy, we can plan our own economy, surviving in the market, joining the competition and developing." Zhang's customers like the changes. His spiffy supermarket on Nanjing Road makes Stop & Shop look like a corner bodega, and the choice, quality and cost of the merchandise there tells more about China's changes than any interview. Ditto the scene at the fashionable department store we visit."Twenty years ago, we only had two kinds of styles and three colors to chose from," Zhang explains. "But things have changed a lot.Forget the Mao suits -- the Chinese are now as brand-conscious as any people on the planet, clad in everything from Armani to Polo to the ubiquitous Nike apparel -- or "Nick," as the unsuspecting young people we met called it. "You can find clothes in any fashion style in Shanghai now," Zhang concludes. "I happened to be at the fashion show conference in Italy Recently and I think that we are just as good as them." Zhang's remark reminded me of something the Finance Minister had told us earlier. "Before the reforms, there used to be only seventeen different kinds of keys manufactured in China," he smiled. "So if you bought them all, you could open any door in China!"The next day we visited Sharp Electronics and Shanghai's Coca-Cola bottler, two of the joint ventures that are rapidly taking the place of state-owned enterprises. Sixty percent Japanese-owned, Sharp manufactures many of the proverbial billion refrigerators."Sharp has 64 branches in 34 countries -- our business is global," company president Mitsuo Saito explains. "But China is special, because it is going to be a huge market in the twenty-first century."Coca-Cola executives obviously share Saito's analysis. Coke's Shanghai plant, which can fill 1500 cans and 500 bottles every minute, is one of the most technologically advanced in the world, and Asia's largest. Its Deputy General Manager Tang Yong Xing tells a revealing anecdote."In 1979, Coca-Cola officials donated an assembly line to the city of Shanghai," Tong recalls with a grin. "But there were two problems: first, no one in China knew how to put it together, and second, local party leaders were suspicious that it was a capitalist plot!" So the plant sat there, unused, until 1986, when Shanghai's then-mayor Jiang Zemin -- now President of China and Communist Party General Secretary Jiang -- decided to put it to work. The result was a revolution -- for the Chinese beverage industry, that is.Although I would have liked to stay longer in Shanghai, a more prominent visitor named Bill Clinton was about to arrive from Washington, so we left for Chongqing. Nestled between three mountains on the banks of the Yangtze River, this inland municipality of thirty million is slated to drive the development of China's entire southwestern region in the coming century. Here again the people spoke a different language, consumed different food -- the fiery-hot Sichuan cuisine -- and seemed in many respects to live in a different country.In Chongqing we sang a lot of karaoke -- the Chinese are crazy for the fad -- ate a lot of 'hot pot,' and were free to videotape anything we wanted without restriction. Three things stood out above all else -- besides the karaoke, of course. The first was the constant mentions of Chiang Kai-Shek, revered here as a local hero who fought the Japanese invaders And (surprisingly) not reviled as a counter-revolutionary Nationalist leader who eventually fled to Taiwan and set up the rump China that persists to this day. The second was the "Stick Army," an association of former farm workers who came to Chongqing as surplus labor with only muscles, bamboo sticks and a few strands of rope, and who were now ubiquitous and organized as a sort of People's Federal Express, carrying parcels for the many shoppers at the city's malls. The third -- and most ominous -- was the crowd unemployed workers standing in the sun on a street corner seeking day labor."Because of the lay-off policy, the state couldn't even pay us a basic pension, and we have to keep looking for jobs," one laid-off cook told me. Another would-be worker added "I can't make money without a job, and I have no income now, so I worry about the future."With the Asian Flu crippling economies from Indonesia to Japan and threatening China's future growth -- and with another thirty million state employees about to join the unemployment line -- we should all worry about the future of the world's most populous nation. Will the Chinese be able to overcome the challenges, sustain growth and continue to rise in the coming century? The entire world has a stake in the answer. Chinese officials maintain that they can -- and that in any event, they will never turn back.As I got on a plane to head east back to America, the Finance Minister's concluding remarks resounded in my mind. "China's most significant reform was opening its markets to the rest of the world. Now that this door is open, it will never be closed again," Xiang Huaicheng assured me. "There should be no doubt that these reforms cannot be stopped, and any forces that try to block them will be rejected by China."


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